Forecasting techniques

About company
Company under study produces garden tools. As company does not has very innovative procedures and
advanced machinery, so it relies on mostly consumer services. Different department uses different
methods to predict the future sales due to which there is always a conflict in demand and production.
Top manager is trying to assess the problem company is currently facing regarding how much it should
produce.

Forecasting
Art & Science of Predicting Future Events or Future Values of a Variable.

Forecast depends on many factors like using historical data, personal experience, and some variables
affecting sales. It is important as good forecast can help in production with 0-3% error and saves from
pileup and low production.

Company Forecasting system-1

Marketing department uses quantitative forecasts like demand forecast and economic forecast. As they
try to understand market situation whether market is going up or down. And tries to find the expected
demand

Problem
It is not certain whether the economic situation and demand forecast is for company products. So the
economic forecast, which takes factor how economy is performing, sometimes become irrelevant for
the company forecast.

Company forecasting system-2

Marketing company also uses historical data forecast.

Problem
Although past continues to exist, but it does not give any surety that next forecast would be like the past
demand.

Company forecasting system-3

However, production manager uses qualitative forecast like using his intuition and personal experience
to forecast the demand

Problem
Personal experience helps in predicting the demand for future. However, the current scenario shows
that manager is unable to use his qualitative approach to predict rightly and therefore, there is a gap
between production and demand.
Recommendation
Company should use seasonal forecasting method. As forecast shoots up by end of year while it remains
smooth in other months. So, it will be better if they forecast using seasonal sales.

Forecast method
The company is facing problem in predicting the exact demand because currently under use method of
historical data which suggest the demand will be similar next year is wrong, as it is evident by historical
demand. No month has same demand in any of the four years.

The method used for forecasting is average seasonal sales method. As sales fluctuate by season, so it is
better to have season sales method. There is a clear pattern evident in forecasting sales that first sales
are high, then reduces to its extreme low and then pick up again. In this way, it will really help to
forecast our sales and produce the require output.